Accrol returns to profit and on target to meet current forecasts

Accrol, the Blackburn-based AIM-listed tissue and toilet roll maker, has achieved a return to profit, despite a dip in revenues, for its interim period of trading.

In the six months to October 31, 2023, the business experienced a 17.2% fall in turnover, to £100.3m.

But it reversed the previous year’s £900,000 pre-tax loss with a £400,000 pre-tax profit in a £1.3m turnround.

Adjusted net debt also fell, by £5m, to £25.5m.

The board said the group has performed strongly in the first half of 2024.

While revenue reduced, as expected, as prices eased following the significant inflationary-led increases in fiscal year 2023, branded volumes continued to grow in the group’s key markets, rising by 45% in the first half, and margins returned to pre-pandemic levels rising by 930bp to 27.3%.

The group is firmly on track to deliver full year 2024 results in line with the board’s expectations and, following the acquisition of Severn Delta earlier this month, now expects to outperform its previous expectations for 2025.

Market expectations, as at January 29, 2024, for fiscal years 2024 and 2025, respectively, are revenues of £205m and an EBITDA of £21m, and £211.1m, and £21.9m.

CEO, Gareth Jenkins, said: “We are pleased with the group’s performance which has come in ahead of our initial expectations at the start of the financial year.

“We continue to deliver by producing great quality and value products, which meet every consumer’s budget.

“Our unrivalled retail relationships and robust supply model ensure that we can continue to deliver strong results in this dynamic market environment. The group is delivering on its strategy and is well positioned to deliver further growth, as it builds upon its broad customer base and market leading products.”

Accrol said it intends to resume dividend payments, as soon as is practicable, with a “prudent and sustainable dividend cover of c.2.5x – 3.5x”.

Also, the board, albeit mindful of liquidity constraints, continues to see significant value in the current Accrol equity valuation and seeks the flexibility to act accordingly in terms of potential share buybacks.

Since the reporting period, the group acquired Severn Delta in January 2024, a £5m revenue wet wipe and tumble dryer sheets business, in line with strategy to broaden the product offering.

The acquisition brings significant increased scale in wet wipes and brings new products to the group by producing household, disinfectant wipes and tumble dryer sheets. Severn Delta is expected to positively impact adjusted EBITDA in fiscal year 2025.

A new long term agreement was also signed with a global FMCG group to supply a well known branded product under licence – due to launch in March 2024.

Current trading is producing a strong margin performance, to date.

Further volume growth is expected, driven by the group’s strong private label supply position, great brands, the new licenced products, which are benefiting from the cost-of-living pressures impacting consumers.

Adjusted net debt is on track to reduce to c.1x EBITDA by year end, even after the acquisition of Severn Delta.

Executive chairman, Dan Wright, said: “Over the last four years, Accrol has been transformed as an organisation into a leading manufacturer of private label, own branded and now licensed tissue products to the UK market.

“Our state-of-the-art businesses are in an incredibly strong position to benefit from the rapid and significant growth in the in these markets, and we have considerable further capacity to drive these opportunities.”

He added: “The growth in our branded range and the partnerships we are developing, to bring high quality valued licensed products with global brands, continues to strengthen our pricing and margin improvement. We look forward with increased confidence to the continued growth of the business.”